SAO PAULO, Nov 5 (Reuters) - Activity in Brazil's services sector surged to an eight-month high in October, a closely watched business survey showed on Tuesday, adding to hopes for a fourth-quarter rebound in Latin America's largest economy.
HSBC's Purchasing Managers Index for Brazilian services rose to 52.1 in October from 50.7 in September on a seasonally adjusted basis, at its highest level since February. A reading above 50 indicates expansion.
Stronger services activity led a broader rebound in Brazil's private sector. HSBC's Composite Output Index for the country, which includes both services and manufacturing activity, also hit an eight-month high of 52.0 in October, compared to 50.7 in September.
The October survey raised hopes for a recovery to end the year after Brazil's economic activity hit a soft spot in the third quarter due to a sharp currency swing, stagnant wages and a plunge in consumer confidence.
"Firms reported that new business expanded at the fastest pace since the beginning of the year," wrote Andre Loes, HSBC's chief Brazil economist, in a research note.
"This is contrary to what other economic data had been pointing to in recent months ... and, if sustained, points to surprisingly strong economic growth in the fourth quarter."
Recovering business confidence improved the pace of new business in five of six sectors in the survey. As a result service providers added jobs at the fastest pace in 16 months, although hiring remained modest by historical standards.
Inflationary pressures also continued to ease, with service providers raising prices at the slowest pace in 21 months.